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The politics of the post-2009 financial sector regulatory reforms in the United States Sutton, Brent A


This dissertation is composed of three papers analyzing the post-2009 financial sector regulatory reforms in the United States. All three papers use process tracing to perform qualitative analysis. Evidence for my analysis in part comes from contemporaneous media reports, congressional hearings, and speeches and memoirs of key participants. In addition, about 50 interviews were conducted in Fall 2018, mostly in Washington, D.C. The first paper asks why the reforms brought about only incremental rather than transformational change given the obvious failures of the pre-crisis structure and an angry public demanding change. I argue that the need to restore the confidence of institutional investors in bank securities limited the types of policies that policymakers were willing to consider. The next two papers focus on particular regulations that were stronger than expected given strong bank opposition: capital adequacy rules for U.S. globally systemically important banks (G-SIBs) and the Volcker Rule. The second paper argues that the U.S. policymakers adopted capital adequacy rules for large banks exceeding international standards because they believed they were necessary to make banks safer but, also, that they would not undermine their international competitiveness. This paper counters the claim that the globalization of financial markets prevents countries from adopting regulations that exceed international standards. My third paper examines the Volcker Rule, a signature part of the Dodd-Frank Act that prohibits banks from engaging in proprietary trading and severely restricts investments in hedge and private equity funds. I argue the Volcker Rule was adopted because proponents were able to exploit veto points in the policymaking process. The result is different from most of the existing literature on veto points, which show how they tend to inhibit policy change. The final two papers find that factors widely believed to limit policy change may do so only under certain conditions. Specifically, concerns about international competitiveness and the ability of policy opponents to use veto points to block policy change do not always prevent regulatory change from occurring.

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